Dollar higher as US currency softens

THE dollar was trading almost US1c higher at midday, as it continued to benefit from a weakening US currency.

THE dollar was trading almost US1c higher at midday, as it continued to benefit from a weakening US currency.

At midday (AEDT), the local unit was trading at US99.49c, up from yesterday's close of US98.54c.

Since 7am, the local unit traded in a range between US99.40c and US99.68c.

"It's largely more a US dollar story than a true Aussie strength story," said RBC senior economist Su-Lin Ong.

"US dollar is weaker generally across the board, hit by a couple of factors."

Overnight, ratings agency Moody's warned the US will put its top level credit rating at risk if Congress extends a sweeping package of tax cuts and unemployment spending.

"That's weighing on the US dollar and by definition, most of the other currencies are up, including the Aussie," Ms Ong said.

Tomorrow morning (AEDT), the US Federal Reserve will announce the outcome of its December monetary policy.
Ms Ong said this could provide short term direction for the dollar.

"What we'll be watching for is for any upgrade in assessment in the economic outlook," she said.

"If we got a slightly more positive economic outlook, that could lend some support to the US dollar and the Aussie may come off a little bit off the back of that."

The bond market was slightly firmer at midday.

At midday on the ASX 24, the December 10-year bond futures contract was at 94.340 (implying a yield of 5.660 per cent), up marginally from yesterday's close of 94.305 (5.695 per cent).

The December three-year bond futures contract was at 94.760 (5.240 per cent), up from 94.735 (5.265 per cent).